Chevron's wholly owned subsidiary Energy Forge One has locked in a 20-year power purchase agreement with Microsoft to supply electricity to a new data center in West Texas, the company announced June 22. The project, called Kilby, is being developed with Engine No. 1 and is designed to deliver roughly 2.67 gigawatts of capacity.
What Kilby is and how it works
Kilby will be a co-located facility, meaning the power plant sits directly next to the Microsoft data center it serves rather than feeding into the regional grid. That setup lets Kilby deliver dispatchable electricity on demand while reducing the load the project places on the broader West Texas grid that residential and commercial customers rely on.
The bulk of generation will come from large GE Vernova turbines and associated electrical infrastructure. Solar Turbines, a subsidiary of Caterpillar, will provide additional capacity. The build will follow a phased, modular approach, allowing Microsoft and Chevron to expand output incrementally as AI compute demand grows.
Fuel will come from Permian natural gas, which Chevron already produces in the region. The plant will use non-potable brackish groundwater rather than freshwater for cooling operations, and the design includes Selective Catalytic Reduction systems to cut nitrogen oxide emissions.
Deal terms and timeline
Kilby targets mid-teen returns. Chevron expects to make a Final Investment Decision by the end of 2026, pending the completion of other required conditions. First power delivery is targeted for 2028.
Chevron frames the project as a source of cash flow that sits outside oil and gas price cycles, which have historically driven earnings volatility for integrated producers.
Regional economic impact
Chevron projects that Kilby will generate more than $10 billion in state and local tax revenue over its life and support close to 2,000 jobs in West Texas.
At 2.67 GW, Kilby ranks among the largest co-located natural gas and data center projects in the United States.
